The Case for Gold in an Uncertain World

gold barIn this position paper, we will discuss our rationale for instituting a position in gold across our clients’ portfolios. There are many opposing viewpoints about owning gold in a diversified portfolio. We will look to address these countering points of view and explore how the current macro landscape makes the rationale for owning gold more compelling than it has been for quite some time. Specifically, we will discuss:

  • Opportunity cost of owning gold – Investors often shun gold in favor of assets with a positive expected return, namely stocks and bonds. However, stocks are trading near all-time high valuations and yields on traditional bonds are anemic, making alternative investment opportunities such as gold more attractive on a relative basis.
  • Traditional diversification is broken – Historically, stocks and bonds have behaved differently from one another and have therefore acted as efficient diversifiers when combined in a portfolio. However, in recent years, the data has shown that stocks and bonds have become more highly correlated with one another. Gold, on the other hand, has displayed a low correlation to both stocks and bonds over extended periods of time.
  • Gold as a store of value – Gold is the one global currency that cannot be created out of thin air in this age of undisciplined money printing. All currencies are susceptible to debasement by central banks looking to stimulate their debt-ridden economies through easy monetary policies. Unlike most paper currencies, gold has maintained its value over long time periods.

We understand that this positioning may not be popular as traditional assets continue their march upward with the support of central banks. However, with the expensive nature of traditional stocks and bonds, coupled with the heightened risks of currency debasement and possible inflation, we believe that a modest allocation to gold can act as a meaningful hedge over time.

Read the full position paper here

A Hybrid Approach to Active vs. Passive Investing

Active-vs-Passive-Investing-Image-largeThe investing world has changed dramatically since the credit crisis. Technological advances have continued to reduce trading costs in the equity markets and global central banks have embarked on and sustained zero-interest-rate policies. According to Merrill Lynch, 83% of the world’s equity markets are currently supported by countries with such policies. From a historic perspective, the current low level of global interest rates, both real and nominal, is only parallel to the depression era of the 1930s. These conditions have resulted in a global stock market that is driven by broad economic announcements as opposed to company fundamentals. The evidence of this trend can be seen in the high correlations amongst sectors and stocks as they react as a group to economic news such as employment or inflation statistics.

Read more

Jeffrey Sarti Featured In Financial Advisor Magazine – Alternatives: A Way To Lock In Historic Market Gains?



In the summer of 1982, Duran Duran was atop the music charts, Leonid Brezhnev was still calling the shots in the Soviet Union, and the United States was just coming out of a decade-long economic slump. Back then, the S&P 500 stood at 105.

Fast forward to 2015, and that market index has surged nearly 2,000%. A multi-decade plunge in interest rates has led to stellar returns for bond investors as well. Despite some notable bumps in the road in 2000 and 2008, the bond and stock markets have delivered remarkable long-term returns, enabling many baby boomers to build powerful retirement nest eggs.

Yet few expect the stock and bond markets to deliver such robust returns in the years ahead, and for many the question is whether the remarkably long bull market in stocks and bonds will end with a whimper or a bang.

At this point, a quick history lesson about stocks and bonds is helpful. From the 1960s through the end of the 1970s, “stocks and bonds were negatively correlated,” notes Jeff Sarti, co-president of Morton Capital Management. Since the early 1980s, however, these two asset classes have often moved in lockstep. They have both benefited from falling inflation, rising corporate productivity and, more recently, a fire hose of liquidity from the Federal Reserve.

A changing Fed stance regarding liquidity may have an equally deleterious effect on both asset classes. “We’re very concerned about central bank policy. … We’ve had a free lunch thus far,” says Sarti, adding that if stocks lose ground, “bonds are unlikely to be the diversifier they once were.”

Read More

Jeffrey Sarti Featured in Financial Advisor Magazine – When Researching Alternative Products, Look For ‘Red Flags,’ Experts Say



The allure of alternative investments — potential gains that are uncorrelated with stock and bond price movements — is not without risks that investors need to be aware of, a panel of experts told advisors during a breakout session at the 6th Annual Inside Alternatives Conference in Denver.

The event, sponsored by Financial Advisor and Private Wealth magazines July 13-14, drew over 600 financial industry professionals.

Jeffrey Sarti, co-president of Morton Capital, a Calabasas, Calif.-based RIA firm, told the audience that he looks for smaller and niche investment opportunities in real estate to create true diversification and cash flow “in this stupidly low interest rate environment.”

Sarti said he tends to concentrate on funds with $50 million to $150 million in assets. The advantages of this focus are more targeted opportunities and less competition. The disadvantages are increased operational and business risks that are inherent in investing with smaller organizations. “We have to ensure that these smaller funds have appropriate levels of oversight,” he said.

Read more